Financial climate

2010
ANCO RAMÍREZ NELIA ISABEL |

InternationalBusiness | The Financial Climate |

UNIT 1
The financial climate
Part 1: World economic climate | ----------3 |
Part 2: Key indicators | ----------6 |

Part 1: World economic climate
1) Warm – up

1.1 ) How important is the states of the world economy for the financial state of an international business?
Through ofanalyzing the global economy we must review the dimension that transcends the borders of a country.
International institutions exercise authority over the global economy they are not often but the continuation of strong public and private actors.
History shows that the power of international economic institutions is often not merely a reflection of the power of states and most powerful corporationsthat dominate.
Within the global economy is also involved, the power exercised by global finance comes from the possibility that influence the internal value (prices) and external (exchange rate) currencies, as well as their ability to decide who can benefit from credit and under what conditions. An essential power in a capitalist economy monetized in which credit plays a decisive role.Deciding which countries, which companies, which individuals will be able to benefit from this or that financial resources for so long and what kind of interest represents an essential capability of setting the rules of the economic game.

1.2 ) Do financial managers need to interpret trends in the world economy?
Yes, because this way we will choose the best decision on which countries, firms,persons who may receive such financial resources for so long and what kind of interest, represent an essential capability of setting the rules of the economic game

2) Reading
Read the following article “World economic pointers are discouraging” (June 1990).
As you read it, indicate economic trends in chart 1.1
The world economy appears to have taken a turn for the worse this year.
Lastyear’s surprisingly strong growth in the developed world and the newly industrializing countries of Asia has given way to fears that the current seven year recovery from the recession of the early ‘80s nay be about to end in the familiar cycle of stop – go .
Inflation has returned to haunt the major industrial economies, forcing interest rates higher from the lows set after the global stock marketcrash of 1987.
The international debt crisis has flared up again reminding us that Latin America and other parts of developing world have largely missed out on the growing prosperity of the 1980s.
Serious doubts have resurfaced about the viability of the economic policies pursued by the US. The International Monetary Fund (IMF) warned recently that continuing strong domestic demand couldtrigger a new jump in the US current account balance of payments deficit, with the attendant risk of a sudden drop in the dollar’s value and a further twist to the international interest – rate spiral.
The state of international trade remains a worry. The discontent in the in the US about the imbalance of trade with Japan could lead to a return to protectionist measures.
This uncertain view of theworld reflected in the (IMF’s) latest World Economic Outlook report, at the beginning of April. On first reading it appeared to offer some hope that the industrial world can achieve a soft landing from its present overheated state.
The IMF projected a slight in the rate of output growth in the industrial countries, to 2.9% next year from 3.3%this year. Consumer-price inflation was projected tofall next year to an average of 3.5%, after rising to 3.8% this year.
But the IMF projections also foresaw marked deterioration of the global current account imbalance .They said that the US current account deficit could account $156bn next year from $139bn this year. It projected rise in Japan’s current account surplus increasing to $93bn from $84bn this year. Similarly, West Germany’s surplus...